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Twitter's Post-IPO Life Will Be About Communicating Profits

Stocks in this article: NYXFB

After Twitter's IPO, the company's value will also hinge on its ability to adapt its earnings streams and its success in communicating the strategy to investors.

Facebook shares stagnated for months after its $16 billion IPO until CEO Mark Zuckerberg was able to communicate and then show in earnings that the company could build significant mobile advertising revenues to replace falling desktop usage.

A similar scenario is likely to hold true for Twitter, and in that respect, it could be a positive for prospective investors that Costolo and Twitter have left a lot about their business unsaid.

In terms of some goal posts for Twitter's IPO valuation, Sica of SICA Wealth Management and a steady stream of recent analyst valuations indicate that the company's stock price would become stretched at $30 a share and beyond.

Sterne Agee analyst Arvind Bhatia said in a Monday client note that Twitter could be worth between $25 and $32 a share in the next 12 to 24 months, respectively.

In a bullish scenario where the firm's advertising and data licensing platform impresses its partners, Bhatia said Twitter could be worth as much as $48 a share. Were Twitter's execution to disappoint investors, Bhatia pegs the company's value as low as $13 a share.

"As such, if the IPO is priced in the $17 to $20 range, shares would appear attractive from a risk-reward standpoint," Bhatia wrote. The analyst noted that Twitter's usage is tilted heavily towards mobile devices with 76% of its users accessing the network via mobile.

Twitter is also in the early stages of its international revenue growth. Currently, international users account for 77% of Twitter's overall user base but just a quarter of the firm's overall revenue.

On Monday, TheStreet contributor Douglass Kass of Seabreeze Partners said he would be willing to pay $32.50 a share for Twitter's stock, citing the company's strong market position, its user base and a modestly-sized share offering. Kass also highlighted Twitter's "reasonable valuation vs. peers" such as Facebook, LinkedIn and Zillow, which trade at higher multiples of sales and average revenue per user.

Twitter will trade under ticker symbol 'TWTR.'

Goldman Sachs (GS) will lead Twitter's IPO, while Morgan Stanley (MS), JPMorgan (JPM), Bank of America (BAC), Deutsche Bank, Allen & Company and CODE Advisors will also participate in the offering.

-- Written by Antoine Gara in New York

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